How No Cost EMI actually works & its Pros, Cons

There is a saying “Be satisfied with what you have”. But the reality is completely opposite because the human desire is never ending. We always want more. So we end up buying more than we need. We spend most of our time looking at things online. ‘No cost EMI’ is the biggest buzz in today’s market. To begin with the full form of EMI which is ‘Equated monthly installment’. Explaining this in simple terms, if you desire any electronic appliance and you are unable to pay the amount all at once, you can pay it in equal monthly installments. Now as we are approaching towards New year, we will see a lot of offers online on various products. But the only thing that attracts us the most or we can even say is the decision making factor in buying the product is ‘No cost EMI’. We understood what is EMI, similarly No cost EMI is when you buy something and do not pay any extra amount as interest even after choosing the payment mode on equal monthly basis. But it is surprising, isn’t it ?

How No Cost EMI actually works and its Pros Cons

How No cost EMI Actually Works

Let me take you through how No cost EMI actually works.

We buy products on EMI which takes away the pressure of paying huge amounts all at once. It sometimes is not possible for a middle class person to buy expensive things, but now with this EMI scheme everybody can fulfill their desires but paying small amounts every month. But then let’s not forget the fact that “there is always a price that we have to pay”. So it is very important for us to understand the reality of these No cost EMI or Zero cost EMI schemes. The retailers that sell products be it online or offline are always connected to various financial institutions that provide consumer friendly loans on various electronic gadgets for example mobiles, T.V, refrigerators and so on. The retailers market these as ‘No cost EMI ‘ but in reality there is always an interest amount behind this zero cost schemes. And surprisingly the interest is also very high ranging from 15% to 24%. But if this is the truth then you must be thinking how do they cover up this extra amount that is interest ? So let me tell you how this is actually done. It is safe to say that this No cost EMI is non existent.

To explain this in detail there are a few ways in which these amounts are covered up. For example,

  1. This method is mostly used by online shopping platforms where in they do not offer you the discount that they actually would have offered if you would have made the payment upfront. And in return they pay this offer or discount amount to the bank or the financial institution to cover the interest cost.
  2. The second way is used by retailers who sell their products online as well as in the offline stores. They usually add up the interest amount to the price of the product and then market it as ‘No cost EMI’.

Let’s take a real life example with numbers to make you understand how these schemes work. Let us assume the phone you want to buy is worth Rs. 10,000. Usually the interest rate on a three month EMI plan is 15%. So the interest becomes Rs. 1500. So you would have to pay an extra amount of 1500/-. Now, this is how the ‘No cost EMI’ plan works. The retailers show the cost of the phone as Rs. 11,500/- with a discount of 15% with and an additional no cost EMI offer. So the interest amount is already added to the cost and will be paid by you as you repay the loan. Now you must have understood that the retailers smartly cover up the interest price and the zero cost or no cost EMI is non existent.

Advantages & Disadvantages of No cost EMI

If you are willing to go for a no cost EMI plan you should be aware of the advantages and the disadvantages of ‘No cost EMI’. Here are some advantages –

  1. The biggest advantage is that this no cost EMI scheme lets common man buy luxury products and live their dream.
  2. It is also a super flexible method as there are options like a three month, six month or even a nine months plan where the customer gets to choose a plan according to his/her monthly budget.
  3. Also, when you take small loans and pay EMI’s on time it helps you build a strong and better credit history which may give you future benefits on your credit card.
  4. Not everyone can pay big amounts at once, here the customer gets a relief because he gets a longer time to repay the loan.

After looking at the advantages it’s not time to look at the disadvantages of ‘No cost EMI’.

  1. As we know that the human desires are never ending, this scheme triggers us to buy things that we do not need.
  2. Customers may have to pay a fixed and non refundable processing fee for no cost EMI.
  3. As explained above you might end up paying more price for the product purchased.
  4. The biggest disadvantage is that if in case the customer has to return the product due to some fault and get a refund, they will lose the money they paid as an interest amount.

Now let’s look at who is eligible for this no cost EMI scheme. People using credit cards are eligible as this no cost EMI scheme is only available on credit cards. There are merchants who offer this scheme on debit card but after checking your credit history that is your CIBIL score.

Bajaj Finserv EMI Card

There are many networks and services that provide great schemes. Bajaj finance is one of them. But you must be wondering what is the difference between Bajaj finance and Bajaj Finserv ? Let me help you out with this. Bajaj finserv is a financial service arm of Bajaj holding investment Ltd. It provides a EMI network card that lets you pay up to Rs. 2 lakhs for your purchases on easy EMI’s. You can use this card to shop any electronic appliances be it a mobile phone, television, camera, etc. Not just electronic appliances but you can also shop for home decor and other stuff using the Bajaj Finserv EMI network card. This card comes with a pre-approved loan which makes the process even easier. The tenure is around twenty four months. When you shop at a offline store or even online you can use this Insta card and avail a No cost EMI.


Should you choose No cost EMI in spite of the drawbacks ?

It is advisable to use the no cost EMI scheme only when one is in “need” of the product and not just because one “wants” to buy it.

Is the no cost EMI offered by Bajaj finance beneficial ?

Yes. The no cost EMI offered by Bajaj finance is beneficial as it allows you to pay interest free and most affordable EMI’s.

Can I shop on Amazon using the Bajaj EMI card ?

Yes. You can shop on Amazon using the Bajaj EMI card.

How do I shop with the Bajaj EMI network card ?

Here’s how you can shop offline at the store :
1) Visit a Bajaj partner store near you.
2) Select your EMI card details.
3) Choose the tenure you want.
4) Complete your purchase by verifying an OTP sent on your mobile.

Now we have looked at the whole process, advantages and the disadvantages of no cost EMI and we conclude that it is a great option for the people who are in need and gives them enough time and the allowance to manage their expenses according to their monthly budgets and also buy the things that have always been on their wish list